Denbury Reports 2021 Fourth Quarter and Full-Year Results

PLANO, Texas--(BUSINESS WIRE)--Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today provided its fourth quarter and full-year 2021 financial and operating results.

	4Q 2021		FY 2021
(in thousands, except per-share and volume data)	Total	Per Diluted Share	Total	Per Diluted Share
Net Income	$120,631	$2.19	$56,002	$1.04
Adjusted net income^(1)(2) (non-GAAP)	41,670	0.76	137,646	2.56
Adjusted EBITDAX^(1)(non-GAAP)	81,466		316,422
Cash flows from operations	69,601		317,158
Adjusted cash flows from operations^(1) (non-GAAP)	82,824		312,115
Development capital expenditures	78,350		252,171
Average daily sales volumes (BOE/d)	48,882		48,770
Blue Oil (% oil volumes using industrial-sourced CO2)	25%		24%
Industrial-sourced CO2 injected (thousand metric tons)	841		3,271

FULL YEAR 2021 FINANCIAL AND OPERATING HIGHLIGHTS

• Set a fifth consecutive Company annual record for employee and contractor safety, achieving a Total Recordable Incident Rate of 0.40. Over 600,000 man-hours were completed on the Cedar Creek Anticline (“CCA”) CO₂ pipeline and EOR project without a recordable safety incident.
• Completed the 105-mile CCA CO₂ pipeline ahead of schedule and under budget, which made Denbury the largest operator of CO₂ pipelines in the U.S. by mileage.
• Received third-party verification of the negative Carbon Intensity (“CI”) of Denbury’s blue oil production at the West Hastings and Bell Creek CO₂ floods, resulting in a CI score ranging between -40 to -20 grams of CO₂ equivalent emitted per megajoule of energy.
• Acquired the Big Sand Draw and Beaver Creek EOR fields in Wyoming, including surface facilities and a 46-mile CO₂ transportation pipeline.
• Divested non-producing surface acreage in the Houston area for $15 million, and sold undeveloped deep mineral rights in Wyoming for $18 million.
• Generated more than $55 million of free cash flow⁽¹⁾ (a non-GAAP measure).
• Invested $252 million of development capital, at the low end of the Company’s original development capital guidance range.
• Reduced the Company’s total debt by $103 million over the last year, and exited 2021 with $532 million of financial liquidity (cash on hand and borrowing capacity under the Company’s existing credit facility).

(1)	A non-GAAP measure. See accompanying schedules that reconcile GAAP to non-GAAP measures along with a statement indicating why the Company believes the non-GAAP measures provide useful information for investors.
(2)	Calculated using weighted average diluted shares outstanding of 55.1 million and 53.8 million for the quarter and year ended December 31, 2021, respectively.

2021 CCUS HIGHLIGHTS

• Established the Denbury Carbon Solutions team to drive the Company’s CCUS strategy.
• Executed a term sheet with Mitsubishi Corporation for the transport and storage of CO₂ captured from Mitsubishi’s proposed ammonia project along the U.S. Gulf Coast. The agreement covers a 20-year period, and Mitsubishi’s project is targeted to produce associated CO₂ emissions of approximately 1.8 million metric tons per year, beginning in the latter half of the decade.
• Commenced a joint evaluation with Mitsui E&P USA LLC of potential opportunities across the U.S. Gulf Coast to develop carbon-negative oil assets utilizing industrial-sourced CO₂. As part of the evaluation, the parties seek to jointly pursue CO₂ offtake opportunities from Mitsui’s potential projects along the Gulf Coast.
• Announced joint development of a Texas Gulf Coast sequestration site with Gulf Coast Midstream Partners, with the potential to store up to 400 million metric tons of CO₂. The EPA Class VI permitting process has been initiated and sequestration is estimated to be available by early 2025.

EXECUTIVE COMMENT

Chris Kendall, Denbury’s President and CEO, commented, “I am incredibly proud of our dedicated employees’ achievements throughout 2021 despite many challenges, including the ongoing pandemic and its impacts. First and foremost, we set another record on safety performance, the top priority for me and the entire Denbury leadership team. We further established the framework upon which we will execute our CCUS vision, placing Denbury as the leader in this evolving industry. Within our core operations, we completed the CCA CO₂ pipeline project on time and under budget, and I thank our employees and contractors for their exceptional efforts in achieving this great outcome. We successfully initiated the CCA CO₂ flood which we expect will be one of the largest CO₂ floods in the world, and I’m pleased to share that we started Phase 1 injection early this month. This important milestone will greatly enhance our EOR business and increase Denbury’s production of carbon negative blue oil, which we believe will become a highly desired commodity. Further and importantly, our strong EOR business will provide significant cash flow with which to fund our CCUS investments.

As we enter 2022, we are extremely excited about what lies ahead for Denbury. Our expansive CO₂ pipeline network and proven track record in all aspects of CO₂ transportation and injection positions Denbury as the ideal partner to provide CCUS solutions. We demonstrate our expertise continuously by safely transporting and injecting the nearly ten thousand tons of CO₂ we receive daily from our industrial partners into underground formations. We built on these strengths in 2021 with the execution and establishment of several new CCUS agreements that further set the stage for even greater success in our CCUS operations. My aspiration is that all of Denbury’s existing and future CCUS customers will recognize Denbury as the experienced and accountable partner upon whom they can rely to safely handle their captured CO₂ for decades to come.”

FOURTH QUARTER 2021 FINANCIAL AND OPERATING RESULTS

Denbury’s fourth quarter 2021 total revenues and other income totaled $362 million, a five percent increase over third quarter 2021 levels, driven primarily by an improvement in underlying commodity prices and improved oil price differentials. The Company’s fourth quarter 2021 average pre-hedge realized oil price was $75.68 per barrel (“Bbl”), which was $1.22 per Bbl below NYMEX WTI oil prices. Denbury’s average differential improved more than 50 cents per Bbl from the third quarter of 2021 as values for the Company’s Gulf Coast and Rocky Mountain region sales volumes both improved relative to WTI.

Oil and natural gas sales volumes averaged 48,882 BOE/d during the fourth quarter of 2021, down modestly from the third quarter of 2021 and lower than expectations primarily as a result of unplanned downtime in December. In addition, lower volumes at CCA were attributed to increased oil prices and profitability resulting in more volumes allocated to the third-party net profits interest in that field. Oil represented 97% of the Company’s fourth quarter 2021 volumes, with 25% of the Company’s oil produced through the injection of industrial-sourced CO₂, resulting in carbon-negative blue oil.

Lease operating expense in the fourth quarter of 2021 was $116 million, or $25.75 per BOE, consistent with the Company’s expectation. The slight increase on a per BOE basis from the third quarter 2021 was primarily related to higher commodity prices as higher oil prices increase the Company’s CO₂ costs and higher natural gas prices increase power expenses. Transportation and marketing expenses for the quarter totaled $7 million, consistent with the third quarter of 2021 and reflecting improved contractual arrangements for certain of the Company’s Rocky Mountain region oil volumes.

General and administrative expenses were $16 million in the fourth quarter of 2021, in line with expectations and relatively consistent with the third quarter of the year. Depletion, depreciation, and amortization (“DD&A”) expense was $37 million during the fourth quarter of 2021, or $8.25 per BOE, essentially flat with the third quarter of the year.

Commodity derivatives expense totaled $23 million in the final quarter of 2021, comprised of cash payments on hedges that settled in the quarter of $98 million, offset by a $75 million non-cash gain representing mark-to-market changes in the value of the Company’s hedging portfolio. The Company’s effective tax rate for the fourth quarter of 2021 was negligible, as virtually all of the tax expense/benefit generated is currently fully offset by a change in valuation allowance on its federal and state deferred tax assets.

CAPITAL EXPENDITURES

Fourth quarter 2021 development capital expenditures totaled $78 million, bringing full-year 2021 capital expenditures to a total of $252 million, close to the low end of the Company’s original annual guidance range of $250 million to $270 million. Nearly 60% of the fourth quarter total was dedicated to the CCA EOR project, including the completion of the 105-mile CO₂ pipeline from Bell Creek to CCA, the booster station install, and the infield distribution system to prepare for CO₂ injection. The CCA CO₂ Pipeline was completed ahead of schedule and under budget. Line fill of CO₂ was also completed in 2021, and CO₂ injection into the Cedar Hills South and East Lookout Butte fields commenced in early February 2022. Tertiary oil production response is anticipated in the second half of 2023.

2021 PROVED RESERVES

The Company’s total estimated proved oil and natural gas reserves as of December 31, 2021, were 192 million barrels of oil equivalent (MMBOE), consisting of 189 million barrels of crude oil and 17 billion cubic feet of natural gas. Proved reserves increased by 49 MMBOE during 2021, primarily resulting from increased commodity pricing utilized in determining economic reserves. As of the end of 2021, 95% of proved reserves were proved developed.

Year-end 2021 estimated proved reserves and the discounted net present value of Denbury’s proved reserves, using a 10% per annum discount rate (“PV-10 Value”)⁽¹⁾ (a non-GAAP measure), were computed using first-day-of-the-month 12-month average prices of $66.56 per Bbl for oil (based on NYMEX prices) and $3.60 per million British thermal unit (“MMBtu”) for natural gas (based on Henry Hub cash prices), adjusted for prices received at the field. Comparative prices for 2020 were $39.57 per Bbl of oil and $1.99 per MMBtu for natural gas, adjusted for prices received at the field. The PV-10 Value⁽¹⁾ of Denbury’s proved reserves was $2.7 billion at December 31, 2021, compared to $0.7 billion at December 31, 2020.

Denbury’s estimated proved CO₂ reserves at year-end 2021 were 5.5 trillion cubic feet (“Tcf”), including 4.5 Tcf at Jackson Dome in Mississippi (on a gross basis) and 1.0 Tcf at LaBarge Field in Wyoming (overriding royalty interest). Total CO₂ reserves reflected a slight reduction from year-end 2020 due to 2021 production.

CONFERENCE CALL AND WEBCAST INFORMATION

Denbury management will host a conference call to review and discuss fourth quarter and full-year 2021 financial and operating results, as well as its outlook for 2022, today, Thursday, February 24, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time). Additionally, Denbury will post supporting materials on its website before market open today. The presentation webcast will be available, both live and for replay, on the Investor Relations page of the Company’s website at www.denbury.com. Individuals who would like to participate in the conference call should dial the following numbers shortly before the scheduled start time: 877.705.6003 or 201.493.6725 with confirmation number 13723080.

Denbury is an independent energy company with operations and assets focused on Carbon Capture, Use, and Storage (CCUS) and Enhanced Oil Recovery (EOR) in the Gulf Coast and Rocky Mountain regions. For over two decades, the Company has maintained a unique strategic focus on utilizing CO₂ in its EOR operations and since 2012 has also been active in CCUS through the injection of captured industrial-sourced CO_2. The Company currently injects over three million tons of captured industrial-sourced CO₂ annually, and its objective is to fully offset its Scope 1, 2, and 3 CO₂ emissions within this decade, primarily through increasing the amount of captured industrial-sourced CO₂ used in its operations. For more information about Denbury, visit www.denbury.com.

(1)	A non-GAAP measure. See accompanying schedules that reconcile GAAP to non-GAAP measures along with a statement indicating why the Company believes the non-GAAP measures provide useful information for investors.

This press release, other than historical information, contains forward-looking statements that involve risks and uncertainties detailed in the Company’s filings with the Securities and Exchange Commission, including Denbury’s most recent report on Form 10-K. These risks and uncertainties are incorporated by this reference as though fully set forth herein. These statements are based on financial and market, engineering, geological and operating assumptions that management believes are reasonable based on currently available information; however, management’s assumptions and the Company’s future performance are both subject to a wide range of risks, and there is no assurance that these goals and projections can or will be met. Actual results may vary materially. In addition, any forward-looking statements represent the Company’s estimates only as of today and should not be relied upon as representing its estimates as of any future date. Denbury assumes no obligation to update its forward-looking statements.

FINANCIAL AND STATISTICAL DATA TABLES AND RECONCILIATION SCHEDULES

References below to “Successor” refer to the new Denbury reporting entity after the Company’s emergence from bankruptcy on September 18, 2020 (the “Emergence Date”), and references to “Predecessor” refer to the Denbury entity prior to emergence from bankruptcy. The following tables include selected unaudited financial and operational information for the Successor three month and annual periods ended December 31, 2021, Successor period from October 1, 2020 through December 31, 2020 and September 19, 2020 through December 31, 2020; Predecessor period from January 1, 2020 through September 18, 2020; and certain Combined information for the year ended December 31, 2020, in order to assist investors in understanding the comparability of the Company’s financial and operational results for the applicable periods. All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

DENBURY INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
The following information is based on GAAP reported earnings. Additional required disclosures will be included in the Company’s Form 10-K:
	Quarter Ended
In thousands, except per-share data	December 31, 2021		December 31, 2020
Revenues and other income
Oil sales	$	329,308	$	177,458
Natural gas sales		4,040		1,329
CO2 sales and transportation fees		12,576		8,452
Oil marketing revenues		12,204		5,225
Other income		3,770		4,603
Total revenues and other income		361,898		197,067
Expenses
Lease operating expenses		115,819		89,750
Transportation and marketing expenses		6,513		9,251
CO2 operating and discovery expenses		2,191		1,734
Taxes other than income		25,891		14,511
Oil marketing purchases		11,971		5,179
General and administrative expenses		16,437		17,735
Interest, net of amounts capitalized of $1,085 and $1,078, respectively		690		1,481
Depletion, depreciation, and amortization		37,118		40,529
Commodity derivatives expense (income)		22,832		65,937
Write-down of oil and natural gas properties		—		1,006
Other expenses		903		5,908
Total expenses		240,365		253,021
Income (loss) before income taxes		121,533		(55,954	)
Income tax provision (benefit)
Current income taxes		504		24
Deferred income taxes		398		(2,562	)
Net income (loss)	$	120,631	$	(53,416	)
Net income (loss) per common share
Basic	$	2.35	$	(1.07	)
Diluted	$	2.19	$	(1.07	)
Weighted average common shares outstanding
Basic		51,247		50,000
Diluted		55,114		50,000

	Year Ended Dec. 31, 2021		Year Ended Dec. 31, 2020			Period from Sept. 19, 2020 through Dec. 31, 2020			Period from Jan. 1, 2020 through Sept. 18, 2020
In thousands, except per-share data	Successor		Combined (Non-GAAP)^(1)			Successor			Predecessor
Revenues and other income
Oil sales	$	1,148,022	$	689,020		$	199,769		$	489,251
Natural gas sales		11,933		4,189			1,339			2,850
CO2 sales and transportation fees		44,175		30,468			9,419			21,049
Oil marketing revenues		38,742		13,919			5,376			8,543
Other income		15,288		13,116			4,697			8,419
Total revenues and other income		1,258,160		750,712			220,600			530,112
Expenses
Lease operating expenses		424,550		351,505			101,234			250,271
Transportation and marketing expenses		28,817		37,759			10,595			27,164
CO2 operating and discovery expenses		6,678		4,568			1,976			2,592
Taxes other than income		91,390		60,115			16,584			43,531
Oil marketing purchases		37,734		13,717			5,318			8,399
General and administrative expenses		79,258		67,992			19,470			48,522
Interest, net of amounts capitalized of $4,585, $24,146, $1,261 and $22,885, respectively		4,147		50,082			1,815			48,267
Depletion, depreciation, and amortization		150,640		234,405			45,812			188,593
Commodity derivatives expense (income)		352,984		(40,130	)		61,902			(102,032	)
Gain on debt extinguishment		—		(18,994	)		—			(18,994	)
Write-down of oil and natural gas properties		14,377		997,664			1,006			996,658
Restructuring items, net		—		849,980			—			849,980
Other expenses		10,816		43,940			8,072			35,868
Total expenses		1,201,391		2,652,603			273,784			2,378,819
Income (loss) before income taxes		56,769		(1,901,891	)		(53,184	)		(1,848,707	)
Income tax provision (benefit)
Current income taxes		403		(7,230	)		30			(7,260	)
Deferred income taxes		364		(411,425	)		(2,556	)		(408,869	)
Net income (loss)	$	56,002	$	(1,483,236	)	$	(50,658	)	$	(1,432,578	)
Net income (loss) per common share
Basic	$	1.10				$	(1.01	)	$	(2.89	)
Diluted	$	1.04				$	(1.01	)	$	(2.89	)
Weighted average common shares outstanding
Basic		50,918					50,000			495,560
Diluted		53,818					50,000			495,560

(1)

Combined results for the year ended December 31, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the year ended December 31, 2020 reported in accordance with GAAP.

DENBURY INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
	Quarter Ended
In thousands	December 31, 2021			December 31, 2020
Cash flows from operating activities
Net income (loss)	$	120,631		$	(53,416	)
Adjustments to reconcile net income (loss) to cash flows from operating activities
Depletion, depreciation, and amortization		37,118			40,529
Write-down of oil and natural gas properties		—			1,006
Deferred income taxes		398			(2,562	)
Stock-based compensation		2,534			8,212
Commodity derivatives expense		22,832			65,937
Receipt (payment) on settlements of commodity derivatives		(97,774	)		14,429
Debt issuance costs and discounts		685			685
Gain from asset sales and other		(3,583	)		(3,546	)
Other, net		(17	)		608
Changes in assets and liabilities, net of effects from acquisitions
Accrued production receivable		1,004			(17,126	)
Trade and other receivables		1,525			14,201
Other current and long-term assets		3,053			(2,500	)
Accounts payable and accrued liabilities		(18,984	)		(59,187	)
Oil and natural gas production payable		6,183			4,152
Other liabilities		(6,004	)		(4,006	)
Net cash provided by operating activities		69,601			7,416
Cash flows from investing activities
Oil and natural gas capital expenditures		(37,870	)		(15,839	)
Acquisitions of oil and natural gas properties		(52	)		(81	)
Pipeline capital expenditures		(50,100	)		(612	)
Net proceeds from sales of oil and natural gas properties and equipment		—			58
Other		3,331			16,150
Net cash used in investing activities		(84,691	)		(324	)
Cash flows from financing activities
Bank repayments		(236,000	)		(135,000	)
Bank borrowings		271,000			120,000
Costs of debt financing		—			(8	)
Pipeline financing repayments		(17,332	)		(22,884	)
Other		(696	)		1,638
Net cash provided by (used in) financing activities		16,972			(36,254	)
Net increase (decrease) in cash, cash equivalents, and restricted cash		1,882			(29,162	)
Cash, cash equivalents, and restricted cash at beginning of period		48,462			71,410
Cash, cash equivalents, and restricted cash at end of period	$	50,344		$	42,248

	Year Ended Dec. 31, 2021			Year Ended Dec. 31, 2020			Period from Sept. 19, 2020 through Dec. 31, 2020			Period from Jan. 1, 2020 through Sept. 18, 2020
In thousands	Successor			Combined (Non-GAAP)^(1)			Successor			Predecessor
Cash flows from operating activities
Net income (loss)	$	56,002		$	(1,483,236	)	$	(50,658	)	$	(1,432,578	)
Adjustments to reconcile net income (loss) to cash flows from operating activities
Noncash reorganization items, net		—			810,909			—			810,909
Depletion, depreciation, and amortization		150,640			234,405			45,812			188,593
Write-down of oil and natural gas properties		14,377			997,664			1,006			996,658
Deferred income taxes		364			(411,425	)		(2,556	)		(408,869	)
Stock-based compensation		25,322			12,323			8,212			4,111
Commodity derivatives expense (income)		352,984			(40,130	)		61,902			(102,032	)
Receipt (payment) on settlements of commodity derivatives		(277,240	)		102,485			21,089			81,396
Gain on debt extinguishment		—			(18,994	)		—			(18,994	)
Debt issuance costs and discounts		2,740			12,370			799			11,571
Gain from asset sales and other		(10,609	)		(10,269	)		(3,546	)		(6,723	)
Other, net		(2,465	)		8,359			1,197			7,162
Changes in assets and liabilities, net of effects from acquisitions
Accrued production receivable		(51,944	)		47,986			21,411			26,575
Trade and other receivables		(284	)		(6,776	)		15,567			(22,343	)
Other current and long-term assets		10,390			(1,052	)		(1,795	)		743
Accounts payable and accrued liabilities^(2)		28,500			(83,269	)		(67,167	)		(16,102	)
Oil and natural gas production payable		29,351			(13,704	)		(6,912	)		(6,792	)
Other liabilities		(10,970	)		(3,912	)		(4,035	)		123
Net cash provided by operating activities		317,158			153,734			40,326			113,408
Cash flows from investing activities
Oil and natural gas capital expenditures		(150,911	)		(117,546	)		(17,964	)		(99,582	)
Acquisitions of oil and natural gas properties		(10,979	)		(82	)		(82	)		—
Pipeline capital expenditures		(69,223	)		(12,219	)		(618	)		(11,601	)
Net proceeds from sales of oil and natural gas properties and equipment		19,053			42,260			938			41,322
Other		9,128			28,589			15,842			12,747
Net cash used in investing activities		(202,932	)		(58,998	)		(1,884	)		(57,114	)
Cash flows from financing activities
Bank repayments		(933,000	)		(741,000	)		(190,000	)		(551,000	)
Bank borrowings		898,000			811,000			120,000			691,000
Interest payments treated as a reduction of debt		—			(46,417	)		—			(46,417	)
Cash paid in conjunction with debt repurchases		—			(14,171	)		—			(14,171	)
Costs of debt financing		—			(12,490	)		(8	)		(12,482	)
Pipeline financing repayments		(68,008	)		(74,730	)		(22,938	)		(51,792	)
Other		(3,122	)		(7,725	)		1,638			(9,363	)
Net cash provided by (used in) financing activities		(106,130	)		(85,533	)		(91,308	)		5,775
Net increase (decrease) in cash, cash equivalents, and restricted cash		8,096			9,203			(52,866	)		62,069
Cash, cash equivalents, and restricted cash at beginning of period		42,248			33,045			95,114			33,045
Cash, cash equivalents, and restricted cash at end of period	$	50,344		$	42,248		$	42,248		$	95,114

(1)

Combined results for the year ended December 31, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable period, but should not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the year ended December 31, 2020 reported in accordance with GAAP.

(2)

Working capital changes during the Successor period from September 19, 2020 through December 31, 2020 and the combined year ended December 31, 2020 include an approximately $52 million cash outflow related to settlement of the Riley Ridge helium supply contract claim with APMTG Helium, LLC (“APMTG”).

DENBURY INC. CONSOLIDATED BALANCE SHEETS
In thousands, except par value and share data	December 31, 2021			December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	3,671		$	518
Restricted cash		—			1,000
Accrued production receivable		143,365			91,421
Trade and other receivables, net		19,270			19,682
Derivative assets		—			187
Prepaids		9,099			14,038
Total current assets		175,405			126,846
Property and equipment
Oil and natural gas properties (using full cost accounting)
Proved properties		1,109,011			851,208
Unevaluated properties		112,169			85,304
CO2 properties		183,369			188,288
Pipelines		224,394			133,485
Other property and equipment		93,950			86,610
Less accumulated depletion, depreciation, amortization and impairment		(181,393	)		(41,095	)
Net property and equipment		1,541,500			1,303,800
Operating lease right-of-use assets		19,502			20,342
Intangible assets, net		88,248			97,362
Other assets		78,298			86,408
Total assets	$	1,902,953		$	1,634,758
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued liabilities	$	191,598		$	112,671
Oil and gas production payable		75,899			49,165
Derivative liabilities		134,509			53,865
Current maturities of long-term debt		—			68,008
Operating lease liabilities		4,677			1,350
Total current liabilities		406,683			285,059
Long-term liabilities
Long-term debt, net of current portion		35,000			70,000
Asset retirement obligations		284,238			179,338
Derivative liabilities		—			5,087
Deferred tax liabilities, net		1,638			1,274
Operating lease liabilities		17,094			19,460
Other liabilities		22,910			20,872
Total long-term liabilities		360,880			296,031
Commitments and contingencies
Stockholders’ equity
Preferred stock, $.001 par value, 50,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $.001 par value, 250,000,000 shares authorized; 50,193,656 and 49,999,999 shares issued, respectively		50			50
Paid-in capital in excess of par		1,129,996			1,104,276
Retained earnings (accumulated deficit)		5,344			(50,658	)
Total stockholders’ equity		1,135,390			1,053,668
Total liabilities and stockholders’ equity	$	1,902,953		$	1,634,758

DENBURY INC. OPERATING HIGHLIGHTS (UNAUDITED)
All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.
	Quarter Ended				Year Ended
	December 31,				December 31,
	2021		2020		2021		2020
Average daily sales (BOE/d)
Tertiary
Gulf Coast region		23,933		25,794		24,306		26,675
Rocky Mountain region		8,882		7,086		8,475		7,460
Total tertiary sales		32,815		32,880		32,781		34,135
Non-tertiary
Gulf Coast region		3,929		3,523		3,683		4,001
Rocky Mountain region		12,138		12,402		12,306		13,015
Total non-tertiary sales		16,067		15,925		15,989		17,016
Total Company
Oil (Bbls/d)		47,298		47,471		47,281		49,828
Natural gas (Mcf/d)		9,508		8,002		8,933		7,938
BOE/d (6:1)		48,882		48,805		48,770		51,151
Unit sales price (excluding derivative settlements)
Gulf Coast region
Oil (per Bbl)	$	75.48	$	40.81	$	66.48	$	38.44
Natural gas (per mcf)		5.01		2.37		3.97		1.98
Rocky Mountain region
Oil (per Bbl)	$	75.95	$	40.36	$	66.58	$	36.79
Natural gas (per mcf)		4.34		1.07		3.44		0.77
Total Company
Oil (per Bbl)^(1)	$	75.68	$	40.63	$	66.52	$	37.78
Natural gas (per mcf)		4.62		1.81		3.66		1.44
BOE (6:1)		74.12		39.82		65.16		37.03

(1)	Total company realized oil prices including derivative settlements were $53.21 per Bbl and $43.94 per Bbl during the three months ended December 31, 2021 and 2020, respectively, and $50.46 per Bbl and $43.40 per Bbl during the year ended December 31, 2021 and 2020, respectively.

DENBURY INC. SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)
Reconciliation of net income (loss) (GAAP measure) to adjusted net income (non-GAAP measure)
Adjusted net income is a non-GAAP measure provided as a supplement to present an alternative net income (loss) measure which excludes expense and income items (and their related tax effects) not directly related to the Company’s ongoing operations. Management believes that adjusted net income may be helpful to investors by eliminating the impact of noncash and/or special items not indicative of the Company’s performance from period to period, and is widely used by the investment community, while also being used by management, in evaluating the comparability of the Company’s ongoing operational results and trends. Adjusted net income should not be considered in isolation, as a substitute for, or more meaningful than, net income (loss) or any other measure reported in accordance with GAAP, but rather to provide additional information useful in evaluating the Company’s operational trends and performance.
	Quarter Ended December 31, 2021						Quarter Ended December 31, 2020
	Successor						Successor
In thousands, except per-share data	Amount			Per Diluted Share			Amount			Per Diluted Share
Net income (loss) (GAAP measure)	$	120,631		$	2.19		$	(53,416	)	$	(1.07	)
Adjustments to reconcile to adjusted net income (non-GAAP measure)
Noncash fair value losses (gains) on commodity derivatives^(2)		(74,942	)		(1.36	)		80,366			1.61
Write-down of oil and natural gas properties^(4)		—			—			1,006			0.02
Expense associated with restructuring^(8)		—			—			4,061			0.08
Insurance reimbursements^(9)		(2,399	)		(0.04	)		—			—
Noncash fair value adjustment - contingent consideration^(10)		270			0.00			—			—
Other^(11)		(1,890	)		(0.03	)		(2,896	)		(0.06	)
Estimated income taxes on above adjustments to net income (loss) and other discrete tax items^(12)		—			—			—			—
Adjusted net income (non-GAAP measure)	$	41,670		$	0.76		$	29,121		$	0.58

	Year Ended Dec. 31, 2021						Year Ended Dec. 31, 2020
	Successor						Combined (Non-GAAP)^(1)
In thousands, except per-share data	Amount			Per Diluted Share			Amount
Net income (loss) (GAAP measure)	$	56,002		$	1.04		$	(1,483,236	)
Adjustments to reconcile to adjusted net income (non-GAAP measure)
Noncash fair value losses on commodity derivatives^(2)		75,744			1.41			62,355
Reorganization items, net^(3)		—			—			849,980
Write-down of oil and natural gas properties^(4)		14,377			0.27			997,664
Accelerated depreciation charge^(5)		—			—			39,159
Gain on debt extinguishment^(6)		—			—			(18,994	)
Severance-related expense included in general and administrative expenses^(7)		—			—			2,361
Expense associated with restructuring^(8)		—			—			28,168
Insurance reimbursements^(9)		(2,399	)		(0.04	)		(15,402	)
Noncash fair value adjustment - contingent consideration^(10)		2,346			0.04			—
Other^(11)		(8,424	)		(0.16	)		727
Estimated income taxes on above adjustments to net income (loss) and other discrete tax items^(12)		—			—			(418,655	)
Adjusted net income (non-GAAP measure)	$	137,646		$	2.56		$	44,127

(1)	Combined results for the year ended December 31, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable periods, but should not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the year ended December 31, 2020 reported in accordance with GAAP.
(2)	The net change between periods of the fair market values of open commodity derivative positions, excluding the impact of settlements on commodity derivatives during the period.
(3)	Reorganization items, net represent (a) expenses incurred subsequent to the filing petition for Chapter 11 as a direct result of the prepackaged joint plan of reorganization, (b) gains or losses from liabilities settled, and (c) fresh start accounting adjustments.
(4)	Full cost pool ceiling test write-downs related to the Company’s oil and natural gas properties.
(5)	Accelerated depreciation for an asset impairment as well as impaired unevaluated properties during the year ended December 31, 2020.
(6)	Gain on debt extinguishment related to the open market repurchases during 2020.
(7)	Severance-related expense associated with the Company’s May-2020 involuntary workforce reduction.
(8)	Expenses incurred before the petition date and after the Emergence Date related to advisor and professional fees associated with review of strategic alternatives and comprehensive restructuring of the Company’s indebtedness.
(9)	Insurance reimbursements during 2021 and 2020 associated with the 2020 Delta-Tinsley CO2 pipeline repair and 2013 incident at Delhi Field, respectively.
(10)	Expense related to the change in fair value of the contingent consideration payments related to our March 2021 Wind River Basin CO2 EOR field acquisition.
(11)	Other adjustments include (a) $3.3 million gain on land sales, slightly offset by $1.4 million asset retirement obligation impairment during the three months ended December 31, 2021 and (b) $3.7 million gain on land sales and $0.6 million litigation accrual adjustment upon settlement of the APMTG helium supply contract ruling, slightly offset by $0.9 million write-off of trade receivables and $0.5 million of expense associated with Delta-Tinsley CO2 pipeline repairs during the three months ended December 31, 2020. The year ended December 31, 2021 was further impacted by $7.0 million gain on land sales, slightly offset by $0.3 million write-off of trade receivables. The year ended December 31, 2020 was further impacted by $5.9 million gain on land sales, offset by $4.2 million write-off of trade receivables, $3.8 million of expense associated with Delta-Tinsley CO2 pipeline repairs and $1.6 million of expense associated with the APMTG helium supply contract ruling.
(12)	The estimated income tax impacts on adjustments to net income (loss) for the Predecessor period is generally computed based upon a statutory rate of 25% applied to income before tax, which incorporates discrete tax adjustments primarily comprised of the tax effect of the ceiling test and accelerated depreciation, impacts of the CARES Act, valuation allowances, and the periodic tax impacts of a shortfall (benefit) on the stock-based compensation deduction.

DENBURY INC. SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)
Reconciliation of net income (loss) (GAAP measure) to Adjusted EBITDAX (non-GAAP measure)
Adjusted EBITDAX is a non-GAAP financial measure which management uses and is calculated based upon (but not identical to) a financial covenant related to “Consolidated EBITDAX” in the Company’s senior secured bank credit facility, which excludes certain items that are included in net income (loss), the most directly comparable GAAP financial measure. Items excluded include interest, income taxes, depletion, depreciation, and amortization, and items that the Company believes affect the comparability of operating results such as items whose timing and/or amount cannot be reasonably estimated or are non-recurring. Management believes Adjusted EBITDAX may be helpful to investors in order to assess the Company’s operating performance as compared to that of other companies in its industry, without regard to financing methods, capital structure or historical costs basis. It is also commonly used by third parties to assess leverage and the Company’s ability to incur and service debt and fund capital expenditures. Adjusted EBITDAX should not be considered in isolation, as a substitute for, or more meaningful than, net income (loss), cash flows from operations, or any other measure reported in accordance with GAAP. The Company’s Adjusted EBITDAX may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDAX, EBITDAX, or EBITDA in the same manner. The following table presents a reconciliation of net income (loss) to Adjusted EBITDA.
	Quarter Ended Dec. 31, 2021			Quarter Ended Dec. 31, 2020			Year Ended Dec. 31, 2021			Year Ended Dec. 31, 2020
In thousands	Successor			Successor			Successor			Combined (Non-GAAP)^(1)
Net income (loss) (GAAP measure)	$	120,631		$	(53,416	)	$	56,002		$	(1,483,236	)
Adjustments to reconcile to Adjusted EBITDAX
Interest expense		690			1,481			4,147			50,082
Income tax expense (benefit)		902			(2,538	)		767			(418,655	)
Depletion, depreciation, and amortization		37,118			40,529			150,640			234,405
Noncash fair value losses (gains) on commodity derivatives		(74,942	)		80,366			75,744			62,355
Stock-based compensation		2,534			8,212			25,322			12,323
Gain on debt extinguishment		—			—			—			(18,994	)
Write-down of oil and natural gas properties		—			1,006			14,377			997,664
Reorganization items, net		—			—			—			849,980
Severance-related expense		—			—			476			3,315
Noncash, non-recurring and other		(5,467	)		1,551			(11,053	)		36,565
Adjusted EBITDAX (non-GAAP measure)	$	81,466		$	77,191		$	316,422		$	325,804

(1)

Combined results for the year ended December 31, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable periods, but should not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the year ended December 31, 2020 reported in accordance with GAAP.

DENBURY INC. SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)
Reconciliation of cash flows from operations (GAAP measure) to adjusted cash flows from operations (non-GAAP measure) and free cash flow (non-GAAP measure)
Adjusted cash flows from operations is a non-GAAP measure that represents cash flows provided by operations before changes in assets and liabilities, as summarized from the Company’s Consolidated Statements of Cash Flows. Adjusted cash flows from operations measures the cash flows earned or incurred from operating activities without regard to the collection or payment of associated receivables or payables. Free cash flow is a non-GAAP measure that represents adjusted cash flows from operations less reorganization items settled in cash, interest treated as debt reduction, development capital expenditures and capitalized interest, but before acquisitions. Management believes that it is important to consider these additional measures, along with cash flows from operations, as it believes the non-GAAP measures can often be a better way to discuss changes in operating trends in its business caused by changes in sales volumes, prices, operating costs and related factors, without regard to whether the earned or incurred item was collected or paid during that period. Adjusted cash flows from operations and free cash flow are not measures of financial performance under GAAP and should not be considered as alternatives to cash flows from operations, investing, or financing activities, nor as a liquidity measure or indicator of cash flows.
	Quarter Ended Dec. 31, 2021			Quarter Ended Dec. 31, 2020			Year Ended Dec. 31, 2021			Year Ended Dec. 31, 2020
In thousands	Successor			Successor			Successor			Combined (Non-GAAP)^(1)
Cash flows from operations (GAAP measure)	$	69,601		$	7,416		$	317,158		$	153,734
Net change in assets and liabilities relating to operations^(2)		13,223			64,466			(5,043	)		60,727
Adjusted cash flows from operations (non-GAAP measure)		82,824			71,882			312,115			214,461
Reorganization items settled in cash^(3)		—			—			—			39,071
Interest on notes treated as debt reduction		—			—			—			(46,417	)
Development capital expenditures		(78,350	)		(17,602	)		(252,171	)		(95,168	)
Capitalized interest		(1,085	)		(1,078	)		(4,585	)		(24,146	)
Free cash flow (non-GAAP measure)	$	3,389		$	53,202		$	55,359		$	87,801

(1)	Combined results for the year ended December 31, 2020 are provided for illustrative purposes and are derived from the financial statement line items from the Successor and Predecessor periods. Because of the impact of various adjustments to the financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, certain results of operations for the Successor are not comparable to those of the Predecessor. Management believes that the combined results provide meaningful information to assist investors in understanding the Company’s financial results for the applicable periods, but should not be considered in isolation, as a substitute for, or more meaningful than, independent results of the Predecessor and Successor periods for the year ended December 31, 2020 reported in accordance with GAAP.
(2)	Working capital changes during the quarter and combined year ended December 31, 2020 include an approximately $52 million cash outflow related to settlement of the Riley Ridge helium supply contract claim with APMTG Helium, LLC.
(3)	Includes costs associated with the Company’s restructuring incurred during the period from July 30, 2020 through September 18, 2020.

DENBURY INC. CAPITAL EXPENDITURE SUMMARY (UNAUDITED)^(1)
	Quarter Ended				Year Ended
	December 31,				December 31,
In thousands	2021		2020		2021		2020
Capital expenditures
CCA EOR field expenditures	$	16,664	$	—	$	35,754	$	810
CCA CO2 pipelines		28,142		783		87,688		10,942
CCA tertiary development		44,806		783		123,442		11,752
Non-CCA tertiary and non-tertiary fields		25,578		10,271		97,085		49,800
CO2 sources and other CO2 pipelines		618		287		1,657		660
Development excluding CCA tertiary		26,196		10,558		98,742		50,460
Capitalized internal costs^(2)		7,348		6,261		29,987		32,956
Development capital expenditures		78,350		17,602		252,171		95,168
Acquisitions of oil and natural gas properties^(3)		52		81		10,979		176
Capital expenditures, before capitalized interest		78,402		17,683		263,150		95,344
Capitalized interest		1,085		1,078		4,585		24,146
Capital expenditures, total	$	79,487	$	18,761	$	267,735	$	119,490

(1)	Capital expenditure amounts include accrued capital.
(2)	Includes capitalized internal acquisition, exploration and development costs and pre-production tertiary startup costs.
(3)	Primarily consists of working interest positions in the Wind River Basin enhanced oil recovery fields acquired on March 3, 2021.

 

 

DENBURY INC. SUPPLEMENTAL NON-GAAP FINANCIAL MEASURE (UNAUDITED)
Reconciliation of the standardized measure of discounted estimated future net cash flows after income taxes (GAAP measure) to PV-10 Value (non-GAAP measure)
PV-10 Value is a non-GAAP measure and is different from the Standardized Measure in that PV-10 Value is a pre-tax number and the Standardized Measure is an after-tax number. Denbury’s 2021 and 2020 year-end estimated proved oil and natural gas reserves and proved CO2 reserves quantities were prepared by the independent reservoir engineering firm of DeGolyer and MacNaughton. The information used to calculate PV-10 Value is derived directly from data determined in accordance with FASC Topic 932. Management believes PV-10 Value is a useful supplemental disclosure to the Standardized Measure because the Standardized Measure can be impacted by a company’s unique tax situation, and it is not practical to calculate the Standardized Measure on a property-by-property basis. Because of this, PV-10 Value is a widely used measure within the industry and is commonly used by securities analysts, banks and credit rating agencies to evaluate the estimated future net cash flows from proved reserves on a comparative basis across companies or specific properties. PV-10 Value is commonly used by management and others in the industry to evaluate properties that are bought and sold, to assess the potential return on investment in the Company’s oil and natural gas properties, and to perform impairment testing of oil and natural gas properties. PV-10 Value is not a measure of financial or operating performance under GAAP, nor should it be considered in isolation or as a substitute for the Standardized Measure. PV-10 Value and the Standardized Measure do not purport to represent the fair value of the Company’s oil and natural gas reserves.
In thousands	December 31, 2021		December 31, 2020
Standardized Measure (GAAP measure)	$	2,187,051	$	654,734
Discounted estimated future income tax		486,771		48,346
PV-10 Value (non-GAAP measure)	$	2,673,822	$	703,080

ESTIMATED QUANTITIES OF PROVED RESERVES ROLLFORWARD
	Oil (MBbl)		Gas (MMcf)		Total (MBOE)
Balance at December 31, 2020	140,499		15,604		143,100
Revisions of previous estimates^(1)	55,998		(615	)	55,895
Production	(17,258	)	(3,261	)	(17,801	)
Acquisition of minerals in place	9,765		5,764		10,725
Sales of minerals in place	(66	)	(986	)	(230	)
Balance at December 31, 2021	188,938		16,506		191,689
Proved Developed Reserves – end of year	179,147		16,506		181,898
Proved Undeveloped Reserves – end of year	9,791		—		9,791

(1)	Reflects changes in commodity prices resulting in upward revisions of 50.1 MMBOE.